Did Big Banks Crush Bitcoin, Ripple, Etherum And Other Cryptocurrencies?

Bitcoin is crushed, losing 38.10% of its value over a seven-day period. Ethereum and Ripple are crushed, too, losing 43.23% and 48.14% respectively over the same period — see table 1.

Seven-Day Price Change For Major Cryptocurrencies

Cryptocurrency

%7d

Bitcoin

-38.10

Ethereum

-43.23

Ripple

-48.14

Source:Coinmarketcap.com 2/5/18 at 2:30 p.m.

Other cryptocurrencies have followed suit, too — see table 2.

Table 2

Number of Cryptocurrencies That Advanced/Declined In The Top 100 Ranks

Cryptocurrencies Advance/Decline

Number

Advance

1

Decile

99

Source: Coinmarketcap.com 2/5/18 at 2:30 p.m.

Who crushed cryptocurrency markets? Hard to say. It seems that cryptocurrency markets were in a bubble ripe to burst.

[Ed. note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment. Disclosure: I don't own any Bitcoin.]

Still, big banks may have something to do with both helping the bubble blow bigger and making the burst worse than it could have been.

There was a time when Wall Street and big banks provided a tailwind for Bitcoin, Ripple, Ethereum, and other cryptocurrencies. That was back in the last quarter of 2017, when Wall Street began to recognize Bitcoin as an investment, and was creating the vehicles and mechanisms for broader market participation in it. Like the introduction of Bitcoin futures by CME.

Meanwhile, big banks provided the liquidity for such broad participation by allowing investors to use their credit cards to pay for cryptocurrency purchases – and help the cryptocurrency bubble grow bigger and bigger.

How many investors have used their credit cards to buy Bitcoin? 18.15%.

That’s according to a recently released LendEDU Bitcoin investor survey. Most notably, 22.13% of those investors who used credit cards to fund their Bitcoin purchases didn’t pay off their credit card balance after purchasing Bitcoin.

Now, big banks are cutting off liquidity to the cryptocurrency markets, when they need it the most; and, perhaps, turning a cryptocurrency correction into a crash.

Matthew Schutte, Director of Communications, Holo doesn’t see things that way. "No collusion amidst Wall Street firms or Banks was needed to pop the Bitcoin bubble. Of course, it didn't help either when research reports surfaced pointing out that there was little chance that Bitcoin will replace money for ordinary exchanges thanks to transaction fees in the tens of dollars and settlement times that work fine... for anybody willing to watch a Netflix show while waiting for their payment to go through."

To be fair, banks have a legitimate concern regarding the ability of cryptocurrency investors to pay their credit card balances after the big fall in cryptocurrency prices.

But they shouldn’t have lent money to investors to purchase such high-risk assets in the first place and make the bubble worse than it might have been.

My recent book The Ten Golden Rules Of Leadership is published by AMACOM, and can be found here.

I’m Professor and Chair of the Department of Economics at LIU Post in New York. I also teach at Columbia University. I’ve published several articles in professional journals and magazines, including Barron’s, The New York Times, Japan Times, Newsday, Plain Dealer, Edge Singa...